Lenovo warns of PC shipment pressure as memory shortage hits despite record AI server revenue

Lenovo's Sales Lifted by AI and Rush to Beat Memory Price Hikes

Lenovo's net income fell 21% from a year earlier, and the impact of a global shortage on margins is expected to grow in the coming months. Lenovo Group Ltd. reported better-than-expected sales, helped by consumers buying PCs ahead of anticipated memory chip price hikes as well as strong momentum for its AI servers. Revenue for the December quarter increased 18% to $22.2 billion, above analysts' average estimate of $20.8 billion. The broader PC market expanded 9.6% last quarter, with Lenovo, HP Inc. and Dell Technologies Inc. each recording double-digit shipment growth, according to consultancy IDC. Lenovo's net income fell 21% from a year earlier, however. Get the Business of Food newsletter. Get the Business of Food newsletter. Get the Business of Food newsletter. How the world feeds itself in a changing economy and climate, from farming to supply chains to consumer trends. How the world feeds itself in a changing economy and climate, from farming to supply chains to consumer trends. How the world feeds itself in a changing economy and climate, from farming to supply chains to consumer trends. Bloomberg may send me offers and promotions. Plus Signed UpPlus Sign UpPlus Sign Up By submitting my information, I agree to the Privacy Policy and Terms of Service. Holiday sales and advanced orders placed before widely expected price adjustments are lifting the PC sector. But appetite for AI is squeezing availability for memory chips and other components used in consumer electronics. The impact of that global shortage on margins is expected to grow in the coming months, although larger industry players are better positioned to negotiate with suppliers for priority. "We expect the pulled-forward demand to somewhat persist in the March quarter, but we believe the cheaper inventory should be largely depleted during 1Q. As such, we are likely to see more price hikes going forward, eventually affecting end-demand, especially for consumers," UOB Kay Hian analysts said in a report. Lenovo's infrastructure solutions group, which provides servers and storage hardware, generated $5.2 billion in revenue, up 31% to a quarterly record. Major suppliers to the AI boom, from Nvidia Corp. to Taiwan Semiconductor Manufacturing Co. have issued upbeat outlooks for continued demand in the face of concerns about a potential bubble in the sector.

Lenovo's CEO admits rising memory costs could slow PC sales

AI server business showed high double-digit growth from Nvidia-based deployments Lenovo has signaled growing concern over tightening memory supply, even as it reported solid revenue growth in its most recent financial quarter. The world's largest PC manufacturer delivered stronger-than-expected top-line results, but warned hardware shipments could slow down as component constraints intensify across the industry. Chief Executive Yang Yuanqing said the company has raised prices to offset rising memory costs, telling Reuters, "We expect PC unit sales to face pressure, but believe we can still grow revenue and maintain profitability." Lenovo's third-quarter revenue rose 18% year over year to $22.2 billion, exceeding market expectations, as adjusted net profit, which excludes one-time items and non-cash charges, climbed 36% to $589 million. However, reported net profit declined 21% to $546 million, largely due to a $285 million restructuring charge tied to internal changes, which the company said will reduce costs by up to $200 million over three years. Despite headline growth, the company acknowledged that RAM shortages are creating operational strain. Yang's remarks reflect mounting tension between strong demand and limited component availability. Lenovo's core PC, tablet, and smartphone division, which generates roughly 70% of total revenue, recorded a 14.3% increase in sales during the period. This growth comes as the broader PC market faces supply constraints linked to memory chips increasingly allocated to artificial intelligence systems. Industry observers have pointed to AI infrastructure demand as a key factor reshaping semiconductor allocation patterns. At the same time, Lenovo is accelerating expansion in servers designed for artificial intelligence inference workloads. Its digital infrastructure group posted 31% revenue growth, although it recorded an operating loss of $11 million due to continued investment in scaling AI capabilities. The company also reported high double-digit revenue growth in its AI server business, supported by deployments of rack-scale systems based on Nvidia's GB200 NVL72 design. Yang indicated AI demand is shifting from large language model training toward inference applications, prompting adjustments in Lenovo's server portfolio. The company expects the AI infrastructure market to triple by 2028 and recently introduced new enterprise servers for inference workloads in collaboration with AMD. The warning on PC shipments suggests that even dominant manufacturers are not insulated from semiconductor volatility. Whether higher pricing and AI expansion can fully offset shipment pressure depends on how long memory supply stays limited and how quickly production capacity adapts to demand changes.

China's Lenovo warns of PC shipment pressure from memory shortage​

China's Lenovo Group warned on Thursday about mounting pressure on PC shipments as a worsening memory-chip shortage grips the industry. China's Lenovo Group warned on Thursday about mounting pressure on PC shipments as a worsening memory-chip shortage grips the industry. Chief executive Yang Yuanqing told Reuters after the company released third-quarter results that ⁠the world's ⁠largest PC maker has raised prices to offset surging memory costs, while accelerating its push into the fast-growing AI inference market. "We expect PC unit sales to face pressure, but believe we can still grow revenue and maintain profitability," Yang said. The comments underscore the strain on PC manufacturers as memory-chip shortages, driven by AI demand, squeeze margins and threaten production ⁠targets. Lenovo's third-quarter revenue rose 18% to $22.2 billion, beating expectations of $20.6 billion, but net profit fell 21% to $546 million, weighed down by a $285 ⁠million restructuring charge. The restructuring aims to sharpen the company's focus on the AI inference market and will cut costs by up to $200 million over three years, CEO Yang said. Adjusted net profit, which excludes one-time items and non-cash charges, climbed 36% to $589 million. Lenovo's PC, tablet and smartphone business line, which accounted for about 70% of its total revenue, reported a 14.3% revenue increase for the period. Its digital infrastructure group, which includes its AI server business, grew 31% despite reporting an operating loss of $11 million due to an investment to scale up its ⁠AI capabilities. Lenovo's AI server business posted high-double-digit revenue growth, driven by a strong pipeline and deployment of rack-scale solutions based on Nvidia's GB200 NVL72 design. Yang said AI demand is shifting to inference from training, prompting Lenovo to adjust its server portfolio to target the AI infrastructure market, which it expects to triple by 2028. Lenovo unveiled new enterprise servers for AI inference workloads with AMD in early January.

Lenovo Restructures Data Center Unit As AI Drives Double-Digit Growth To Record Sales

Lenovo says the restructuring occurred last quarter to 'realign the cost structure' of the business unit, which was accomplished by 'streamlining the product portfolio, upskilling the workforce and driving sustained productivity improvements.' Lenovo said Thursday that it restructured its data center business unit to "accelerate the return to profitability" as demand for AI products across its portfolio drove a double-digit increase to record revenue in its recently completed quarter. The Chinese tech giant disclosed the recent restructuring of its Infrastructure Solutions Group (ISG) in its third-quarter earnings report, for which it reported an 18 percent year over year increase to $22.2 billion for the three-month period that ended in late December. [Related: Lenovo Exec: Partners Should Order 'Quickly' For Best Prices Amid Memory Crunch] The vendor's net income dipped 21 percent year over year to $546 million while adjusted net income grew 36 percent to $589 million. The company said the adjusted figure did not include restructuring charges, amortization of intangible assets from mergers and acquisitions, as well as impairment and write-off of intangible assets among other things. Lenovo said the ISG restructuring, which resulted in a one-time charge of $285 million, occurred last quarter to "realign the cost structure" of the business unit. This move was accomplished by "streamlining the product portfolio, upskilling the workforce and driving sustained productivity improvements," according to the company. As a result, the vendor said ISG -- whose portfolio includes servers, storage and other data center products -- is "expected to accelerate the return to profitability in the next fiscal year and deliver annualized net savings of more than $200 million" over the next three years. Lenovo CEO Yuanqing Yang said the vendor delivered an "outstanding performance across all fronts" with "AI becoming a leading growth engine" in the third quarter as it "effectively navigated market challenges of component cost increases and supply shortages." The company highlighted that its AI-related revenue grew 72 percent year over year to "represent nearly a third of overall group revenue, driven by strong demand across AI devices, infrastructure, services and solutions." "Looking ahead, as AI increasingly integrates into individuals' daily lives and enterprise operations, we will continue to drive Hybrid AI to capture the significant opportunities brought by AI democratization, accelerate growth, improve profitability, and deliver long-term value to our shareholders," said Yang, who is also Lenovo's chairman, in a statement. ISG's third-quarter revenue grew 31 percent year over year to an all-time high of $5.2 billion thanks to record sales from an expanding base of cloud service providers as well as ongoing demand from enterprise and SMB customers. At the same time, the business unit reported an $11 million operating loss, which Lenovo said represented a "sequential improvement of $21 million" as ISG moves closer to its goal of breaking even by the end of its fiscal year, which ends in late March. For the three-month period, ISG's AI server business saw "high double-digit year-on-year revenue growth" thanks to a "robust pipeline" of customers as well as the deployment of its rack-scale solution based on Nvidia's Blackwell Ultra GB300 NVL72 design, according to Lenovo. The company also noted 300 percent year-over-year revenue growth for its Neptune liquid-cooling products for data centers. The vendor said ISG is "well-positioned to capture long-term growth opportunities, particularly as AI demand shifts from training to inference," with Lenovo expecting to AI infrastructure market to triple by 2028. The Intelligent Devices Group -- which includes PCs, smartphones and other client devices, -- saw revenue grow by 14 percent year over year to $15.7 billion and operating profits increase by 15 percent year over year as it achieved a 25.2 percent share in the PC market. The company said its PC market share for the 2025 calendar year was an all-time high for Lenovo at 24.9 percent. Both figures were from research firm IDC. Lenovo attributed its 1 percent year-over-year share growth in the PC market to "high double-digit year-on-year revenue growth in AI PCs, a balanced portfolio across commercial and consumer, as well as a strong global presence that captured the Window [end-of-service] upgrade and PC replacement cycle tailwind." The vendor added that profitability for PCs, tablets and other client devices "remained resilient" thanks to "higher average selling prices and margin uplift from its premium PCs, AI PCs, gaming PCs and non-PC adjacencies." This was all achieved "despite industry-wide component supply shortages and rising costs," according to the company. One of the main issues facing the tech industry is the global memory chip shortage, which is being driven by the ongoing AI data center buildout and is resulting in higher DRAM and NAND prices across the board. As for Lenovo's smartphone business, the company said it "delivered record volume and activation," which allowed it to grow faster than the rest of the market in "key regions." The Solutions and Services Group grew revenue 18 percent year over year to $2.7 billion thanks to enterprises in the manufacturing, retail, sports, transportation and smart city sectors "moving AI from experimentation to production." This represented the business unit's 19th consecutive quarter of year-over-year revenue growth, according to the company. It also saw operating margin grow 2.1 points year over year to 22 percent, Lenovo added. The services unit saw a growing share of revenue come from high-growth areas such as managed services and project and solutions, which cumulatively represented nearly 60 percent of the group's total revenue in the third quarter. There was also an uptick in revenue growth for Lenovo's TruScale device-as-a-service and infrastructure-as-a-service offerings, which the company said was "driven by GPU and AI Workloads as customers prioritize flexibility, scalability and faster time-to-value."

Lenovo Caught Napping By 'Democratization Of AI' - Lenovo Group (OTC:LNVGF)

The world's leading PC maker said it took a $285 million restructuring charge in its latest fiscal quarter related to its infrastructure unit that sells AI servers Key Takeaways: Lenovo's profit fell 21% in its fiscal quarter through December, as it took a big restructuring charge prompted by a major shift in the AI computing market The company's gross margin fell 0.6 percentage points year-on-year during the quarter as it struggled with soaring memory prices In more technical terms, the shift represents a move from AI training to AI inferencing, longtime Lenovo CEO Yang Yuanqing explained on the company's earnings call. "The infrastructure market is undergoing an important shift from AI training on public cloud to AI inferencing increasingly happening on-premises and at the edge for enterprises," Yang said. "Thus, I would say, the restructuring we just made is more of a transformation towards the new trend of bringing AI inferencing closer to end users." Worried investors Market reaction to Lenovo's stumble in the important AI infrastructure business was predictably negative. Its stock fell 4.6% on Thursday after the release of the report, and is now down 30% over the last 52 weeks - a sharp contrast to strong rallies for most AI-related stocks over the same time. That could reflect the fact that investors still see Lenovo largely as a PC maker, rather than an AI company. Of that trio, Dell has the most AI-like valuation, though even its trailing price-to-earnings (P/E) ratio is relatively low at 15.1. Lenovo is next with a single-digit P/E of 9.5, while HP commands a ratio of just 7.1, showing this group is still known mostly for their PCs. Returning to the infrastructure business, Lenovo said the restructuring entailed streamlining the company's product portfolio, with added focus on its AI inferencing products. It said the overhaul was expected to result in $200 million in annual savings by its fiscal year that runs through March 2029. The other factor undermining the company during the quarter looks more temporary, and is related to recently soaring memory prices, a key component for both PCs and servers, caused by a global shortage. Those rising prices boosted Lenovo's cost of sales by 19.6% during the quarter, more than its 18.1% revenue growth for the period, causing its gross margin to fall 0.6 percentage points year-on-year to 15.1% in the latest quarter from 15.7% a year earlier. The big restructuring charge, combined with the gross margin erosion, caused the company's profit to drop 21% year-on-year during the quarter to $546 million. Excluding the restructuring charge and some other non-cash items, the company's adjusted profit actually grew 36% in the latest reporting period to $589 million from $435 million a year earlier. "Despite a challenging operating environment characterized by ongoing tariff uncertainties and rising component cost due to supply and demand imbalances, the group has demonstrated exceptional operating resilience, generating solid revenue and profit growth against this macro backdrop," Lenovo said. So, what does all this mean for Lenovo, and how should investors view the company? Lenovo pointed out that 32% of its revenue is now AI-related, though that includes AI models from its PC business, which have yet to prove themselves as the next generation of PC computing. The AI server business looks much more promising, and the infrastructure unit's restructuring, while costly, shows the company is closely watching industry trends and taking corrective action when it makes strategic missteps. Now, Lenovo just needs to show it can operate the infrastructure business profitably again, and accelerate the unit's growth in the developing shift from AI training to inferencing. To subscribe to Bamboo Works weekly free newsletter, click here Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy. Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.